GST: States will get waiver if they opt to borrow ₹97,000 cr
The central government has given details of the two options provided to the states for borrowing to meet their GST shortfall this fiscal year:
nNEW DELHI: States will not have to pay either the principal or interest if they opt to borrow only ~97,000 crore to meet the shortfall in Goods and Services Tax (GST) compensation arising from GST implementation issues, but they will have to bear significant interest costs if they choose to borrow the entire shortfall of ~2.35 lakh crore, which includes revenue losses arising from the Covid-19 pandemic, the Union finance ministry said in a statement released Saturday.
In the case of option 1, the interest and the principal will both come from the compensation cess levied on luxury products and sin goods, and in option 2, only the principal will come from this, finance ministry officials said on condition of anonymity.
They added that the cess on such products will continue beyond the current deadline of June 30, 2022. The compensation cess was originally levied only for a five-year period to bridge short
OPTION 1
If states borrow only ~97,000 crore to meet the shortfall in GST compensation arising from implementation of the tax regime, then they won’t have the principal or the interest
Interest and principal can be derived from cess on luxury goods. This cess – which was supposed to cease in June 2022 – will now be extended
OPTION 2
If states choose to borrow the entire
GST shortfall of ~2.35 lakh crore, they will have to bear interest costs
nnnfalls in the guaranteed payments to states with 14% growth in revenue. As the proposed debt options will be serviced from the compensation cess fund, the levy will continue for longer, the officials said.
The government has sought to distinguish between the shortfall arising from GST implementation
— by the letter of the law, it is liable to pay only this to the states — and that from an “Act of God”, in this case, Covid-19. It is a nuance that isn’t lost on the states, with those ruled by nonbjp parties outraged by the idea.
At the 41st GST Council meet